^'^SfMf^-
^^
ALFRED
P.
WORKING PAPER
SLOAN SCHOOL OF MANAGEMENT
Concession Bargaining
—
1979 to 1983:
Not Just The Same Old Thing
Kirsten R. Wever
Massachusetts Institute of TechnologyApril 1, 1983
WP#lA78-832c
MASSACHUSETTS
INSTITUTE OF TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
Concession Bargaining
—
1979 to 1983:
Not Just The Same Old Thing
Kirsten R. Wever
Massachusetts Institute of Technology
April 1, 1983
WP#1478-83a^
INTRODUCTION
The unions
in
the auto, rubber, steel and airline industries,
others, have been forced to
make wage and
benefit concessions over the last three
Sometimes concession negotiations have
years.
labor as
well.
led to contract
improvements
outcome
looks quite different from the
contracts collective bargaining has yielded over the past three decades.
pattern of regular and continuous gains on
for
Whether the concessions are unilateral
But usually they have not.
(on the part of labor) or bilateral, the
among many
all
The
dimensions encompassed by collective
bargaining has been broken, or at least interrupted.
This essay considers
how
concession bargaining differs from the more standard forms of collective bargaining
that have been dominant over the past thirty years, and whether concession
negotiations portend fundamental changes
will
be conducted
in
in
the
way American
industrial relations
the future.
Since the late 1950s, both good and bad economic times have been paralleled
by regular wage and benefit increases negotiated by American unions for their
members.
(Before that time, wages were more volatile because of the Depression,
and due to austerity measures imposed by the government during and
war.)
Labor has scored benefit gains
paid holidays and supplemental
in
the areas of vacation time, work rules,
unemployment benefits (SUB), among
wage increases have been particularly
just after the
striking.
(See tables
others.
1-3, below.)
In
But
the steel
industry, for instance, the average cost of labor per hour in wages and benefits
Martin, Roderick, "The Effects of Recent Changes in Industrial Conflict on the
Politics of Trade Unions: Britain and Germany," in Crouch, Colin, and
Pizzorno, Alessandro, eds.. The Resurgence of_ Class Conflict ij]^ Western Europe
Since 1968 (New York: MacMillan, 1978); C.f., Salpukas, Agis, "Steel Mood: Hopeful
but Wary," in the New York Times, March 3, 1983
1.
Internal
,
Table 1
AVERAGE HOURLY EARNINGS IN AUTOS, STEEL AND RUBBER
1958
1960
1965
1970
1975
Autos
Steel
Rubber
$2.47
2.70
$2.85
$2.65
1976
1977
1978
1979
Source:
"Wage Patterns and Wage Data," Bureau of National Affairs, Washington
DC, 20037
Tab le 2
GENERAL WAGE CHANGES IN H0:?E~7:DLLECTIVE BARGAINING UNITS
Private Non-Farm
Industries
Manufacturing
Non-Manufacturing
(First year changes in contracts negotiated during the year;
median increase.)
trippled
between 1973 and
1981.
The seventies saw major increases
in
union-negotiated wages, particularly in
the private non-farm and non-manufacturing industries, but also in manufacturing,
where the average
first
year contract increase was 9.2%
annual union wage increases
7.3%
in
scenario
War
II,
workers
1981, only
in
1982
is
to
manufacturing
in
plummet down
to
2.9%
in
6.U%
to
fell
1982.
in
2
More recently,
1979.
in
1980;
it
then rose to
The volatility of the wage
particularly striking in manufactures.
Since the end of World
the average gross hourly earnings of unionized and non-unionized production
in
manufacturing has increased every year.
From 1975 to 1980 those
increases were substantial compared with those of the
previous three decades,
especially considering the fact that the
I97'f-76 period and the late seventies
marked by economic recession.
1982 things were less certain.
1982 the average hourly
wage
But
US manufacturing workers was
of
that figure had dropped to $8.51;
October
it
in
in
September
it
Duly of
$8.55; in August
was back up to $8.59, but by
Moreover, two
had dropped again, to $8.56.
In
were
fifths of
the 2.7 million
workers covered by 1982 collective bargaining settlements are not scheduled for
any specified wage increases
in
1983 at
all.
Organized labor's past economic gains have been due
skill
at the bargaining table.
in
part to the unions'
Since the 1930s, collective bargaining has provided
Handbook of Labor Statistics, December 1980, Bureau of Labor Statistics,
Washington DC, 20008; Current Wage Developments, February 1983, Bureau of Labor
Statistics, Washington DC, 20008
2.
"Wage Patterns and Wage Data," 1983, Bureau
DC, 20037
3.
of
National Affairs, Washington
Davis, William M., "Collective Bargaining in 1983: A Crowded Agenda," in the
Monthly Labor Review, January 1983, Bureau of Labor Statistics, Washington DC,
20008
'.
-
3
the primary arena for labor gains.
characterized the union
By the
movement and
nnid
1950s industrial relations theorists
the collective bargaining
system
as "stable"
and "mature":
To the disappointment ol some, and to the delight of others,
the union movement stopped expanding after the mid-50s and the
overall unionization rate began to decline.
Union leaders turned more
toward day-to-day bargaining relationships and the working out of a
modus Vivendi with already organized employers. Such devices as
multiyear agreements, ^escalator clauses and elaborate fringe benefits
became commonplace.
But the late 1970s and early '80s have seen falling profits and the highest
unemployment
Week
levels since the Great
Depression
—
currently over
10%. Business
reports:
Chalk up 1982 as the year of the skimpiest aftertax corporate
The steel industry was hit with a record $3 billiion
profits since 1976.
loss, automotive companies lost an additional billion.
Business Week's
survey of 1,200 of the nation's largest companies, ranked by sales,
shows a similar dismal pattern: profits down L6% for the year and
earnings off 2^^%
in
the final quarter of 1982.
The aggregate corporate profit margin has fallen.
In
the first quarter of 1980 after
tax profits as a percentage of sales value were 5.5%; two years later that figure
was
'*.1%,
and
in
the final quarter of 1982,
it
had fallen to just 3.6%.
airline industry the annual stockholder earnings per share
auto industry lost $1070.3 million
in
was -$1.55
In
the
in 1982.
The
profits:
In the automobile industy, the 1982 loss was $1.1 billion, almost
matching the $1.2 billion deficit of l981...Internatio;^l Harvester
doubled
its
1981
loss,
ending $1.2 billion
in
the red.
Mitchell, Daniel 3. B., "Collective Bargaining and the Economy," in Stieber,
3ack, McKersie, Robert, and Mills, D. Q., eds., US Industrial Relations 1950-1980:
Critical Assessment (University of Wisconsin, Industrial Relations Research
2
Association, 1981), p.
5.
,
6.
"Corporate Scoreboard,"
7.
Ibid., p.
in
Business
Week, March
63
-
4
-
14,
1983, p.
62
A
Aggregate sales
in
the steel industry
in
1982
fell
9% below
sales:
1981
Bethlehem Steel, with red ink of $1.5 billion, accounted for
But the losses ran $'t63
almost half of the industry's massive deficit.
million at National Steel, more than $300 miliion apiece at Armco and
US Steel, and $2^14 million at Republic Steel.
Aggregate steel profits
industry
in
1982 were -$3102.3 million.
1982 profits in the tire
^^3% below 1981 profit levels.
fell
Concession bargaining has been concentrated over the last few years
precisely the industries that have experienced such losses.
months, the
New York Times
involved
in
last nine
has reported of laoor concessions in front page
articles about just these industries.
airline sectors
Over the
in
The unions
in
the auto, steel, rubber and
(and the food and commercial workers) are those most frequently
the concession bargaining cases of
1982. {See table
8)
Concession negotiations necessarily operate on a different set of principles
than those that have informed US industrial relations
and management
management
of their
a
may have more
in
the past.
First, both labor
interest in joint problem solving to allow
to keep firms and plants open and to let the unions maintain the jobs
members.
matter of sharing
the sacrifices
sectors of the
But the character of their mutual interest
in
is
negative:
it
is
not
the benefits of progress, as in the past, but of distributing
managements deem necessary
US economy.
to sustain
many
historically dominant
Secondly, and consequently, concession bargaining
often results in joint union-management programs that tie the fortunes of the
workers more closely to those of their firms or plants.
Such programs, ranging
from "Quality of Worklife" to employee stock ownership plans, became increasingly
8.
Ibid.
5
-
popular
among management
labor are often disturbing
Further,
in
it
is
circles in the late 1970s.
when
But the implications for
profits are falling and recovery
seems
possible that the introduction of such issues will force
the unions' internal structures, and
in
unlikely.
some changes
their approach to the negotiations.
Thirdly, concession bargaining leads to problems concerning the rank and file's
support of
its
internationals.
leadership and the relationship between union locals and their
This
may
also require that labor officials adopt
new ways
of
approaching management at the collective bargaining table.
We
will
past
begin by laying out the history of collective bargaining and a model that
help us to categorize the ways in which concession bargaining deviates from
modes and outcomes
of industrial relations.
Then we examine a set
of
concession bargaining cases that can be divided into two groups: one group
characterized simply by wage and benefit concessions on labor's part;
both the union(s) and
management gave something up
at
in
is
the other,
the bargaining table.
Next, we analyze how concession bargaining outcomes differ from standard
collective bargaining outcomes.
concession bargaining really
is
Finally,
we conclude
by considering whether
something new and different, and by examining the
implications for organized labor,
if
it
is.
THE HISTORY AND STRUCTURE OF COLLECTIVE BARGAINING
Collective bargaining has always been based on fundamental antagonisms
between unions and managements.
But the lack of industrial
primarily on economic issues, not ideological ones.
harmony has centered
This section will
briefly
describe American organized labor's sense of economically-focussed "business
unionism", the nature of the relationship between labor and
-
6
management during
the
post-war period, and how the processes and outcomes of negotiations were shaped
by the character of this relationship.
Between 1933 and
in
wave
of unionization
The unionized proportion
labor force.
11.5%
19't5 a
22.8%
1933,
in
of
the non-agricultural labor force was
1937, and 35.8% by
relatively friendly to the labor
swept across the US manual
19^17.^
Public policy at the time
movement, and the memory
of the
Depression
spurred a general sense of support for workers' rights to decent jobs.
American unionism had consisted of a sort of craft
more mass-based, covering
a wider range of
1933
elite; after
non-craft workers.
(It
Earlier,
it
—
and continue to be
—
became
should be noted
that this trend occurred in every part of the country except the South,
unionization levels have always been
was
where
low.)
Both the American Federation of Labor (AFL, an association of craft unions),
and the Committee (later Congress) of Industrial Organizatioris, (CIO, a group of
industrial
unions), continued to
The effect
of the
grow
merger was to render
Among
labor highly heterogeneous.
the mid forties.
until
this
In
1955 they merged.
umbrella organization of unionized
the workers represented by the
AFL-CIO were
narrowly skilled craftspeople, organized by occupation, as well as a range of
skilled, semi-skilled
heterogeneity
form
of
is
and un-skilled laborers, organized by industry.
reflected
in
This
the tasks of the AFL-CIO, which do not include any
bargaining with employers over wage/benefit issues, but rather focus on
representing the broad interests of labor at the level of federal, state and local
9.
Rees, Albert, The Economics
Press, 1962), p.
10.
Ibid.,
p.
11.
Ibid.,
pp.
of_
Trade Unions
12
197
24-5
-
7
,
(Chicago: University of Chicago
governments,
in
international labor forums, and through domestic public relations.
As Albert Rees has noted,
The prevailing spirit of the American union movement
unionism... where the union is primarily engaged in
advancing the interests of its members through seeking improvements
in their own wages, hours and working conditions, and is only .2
secondarily concerned with broader programs of social reform.
is. ..business
American unions are primarily involved
in
collective bargaining with employers; they
accept the framework of the existing capitalist economic system.
To some extent, American
labor's focus on collective
bargaining about
primarily economic issues has been forced on them by legislation designed to keep
the unions out of politics.
In
1933 the National Industrial Recovery Act
institutionalized collective bargaining as the proper arena of industrial relations.
In
1935 this act was repeal ed, but the Wagner Act extended unions' rights at the
collective bargaining table.
The National Labor Relations Act, also passed
further sanctioned collective bargaining as the legitimate
But the Wagner Act was opposed and ignored by
relations.
until
its
forum
constitutionality was upheld by the
Supreme Court
Taft-Hartley Act of 1948 amended the Wagner Act
the rights of individual
workers and employers.
It
in
for
many
in
in
1935,
industrial
large corporations
1937. The
ways that restored meiny of
also prohibited the use of dues
funds for contributions to candidates for federal office.
But American labor's sense of business unionism
12.
Ibid.,
p.
2
13.
Ibid.,
p.
182
14.
Ibid.,
p.
Labor Law
,
is
20-1, p.
16, pp.
185; C.f., Gould, William
(Cambridge, MA: MIT Press, 1982)
not simply the result of
B.,
A Primer on American
The Depression saw unacceptably high levels
legislation.
a similar crisis
theory
is
of
unemployment; fears
mounted during the immediate post-war period.
US
that business unionism in the
PerJman's
derives from job consciousness.
primary concern of American organized labor, claims Perlman,
control over and safeguard union
Seiig
members'
jobs.
of
The
to establish
is
Perlman writes:
The overshadowing problem of the American labor movement has
always been the problem of staying organized. ..this fragility of
organization has come from the lack of class cohesiveness in American
labor.
He continues:
only acceptable "consciousness" for American labor as a
"job
whole is a
consciousness", with a "limited" objective of "wage and
job control"; which not at all hinders American umonism from being
the most "hard hitting" unionism in any country.
...the
There are several ways
them seniority
in
which
rules, the regulation of
this
concern with jobs
manifested,
is
among
entry into unions through apprenticeship
programs, jurisdictional boundaries between and within unions, and the effort to
maintain or increase the number of jobs within a given jurisdiction.
publicized "restrictive work rules", which employers have tried to
past half century, were designed
in
part to increase the
number
The highly
combat over the
of unionized
workers within a given task group or jurisdiction.
It
partly because of the non-political nature of the
is
US
labor
movement
that the strike has traditionally been "the most important source of union power."
Strikes are particularly effective in good
15.
Selig
1966), p.
Perlman, A Theory
M
the Labor
economic times.
Movement
162
16.
Ibid.,
17.
Ibid., pp.
p.
169
121,
136
-
9 -
,
When product demand
is
(New York: Kelley Publishers,
strong and profits are high the employer stands to suffer nnore from a temporary
plant
shut-down than when the economic benefits of production are low.
when unemployment
from economic contraints.
of strike will
entail
and prices are rising the unions are relatively free
falling
is
Wage
hikes will be easier to score because the threat
greater potential losses for the employer.
number
particularly interested in securing an adequate
when labor markets are
From the mid
suitably skilled workers
1
tight.
American unions has been
at the national
particularly in manufacturing sectors
of
~
level
organized workers
In
in
power
of
the union "internationals"
where industry
with giant corporations have been dominant.
—
level and pattern bargaining
the unions representing the
these sectors, only officials at the
highest level have the right to authorize strikes.
financially powerful;
of
Moreover, firms are
to late fifties onward, the greatest political
overwhelming majority
Further,
The international
is
also
few locals can amass the funds necessary to pay strike
benefits.
But national officials cannot always impose their bargaining priorities on
lower levels.
illustrate this
Walton and McKersie cite a United Autoworkers (UAW) case to
point:
Since Reuther and the other top officials in the UAW have
placed primary emphasis on making major breakthroughs in the
economic and fringe area, it has been inevitable that local problems
have been deemphasized. A whole host of problems centering on
production standards, relief time, seniority arrangements, etc., have
been relegated to supplementary talks. The difficulty with the
approach came into focus during the 1961 negotiations, when, after
the major issues had been settled, a series of local strikes occurred
over working conditions.
In preparing for the 196^ negotiations
18.
Ibid.,
pp.
20,
19.
Ibid.,
pp.
17^-5
36,
55-6
-
10
Reuther gave top priority to working conditions and said that no
t>e signed until the last local problem had been
agreemem would
settled.
Under a number
of circumstances, union internationals
This right
charters of their locals.
can also suspend the
was restricted somewhat by the
Landrum-Griffin Act of 1959, prescribing many of the internal affairs
Among
unions.
the
other things, the act required public disclosure of union finances
and regularized conventions and elections.
It
also limited the ability of higher
But organized labor's power
level officials to place their locals under trusteeship.
in
of
manufacturing
is
concentrated at the national level, as
still
the late 19th century.
it
has been since
21
As evidenced by the statistics shown in the introduction, collective bargaining
hcis
generally resulted
in
regular wage/benefit increaises for the unionized
Cost of living adjustments and escalator clauses, on top of annual
workforce.
wage/benefit hikes, were standard contract components.
ensured wage adjustments with changes
for
downward adjustments
end of World War
II,
as well.
in
Escalator clauses, which
the Consumer Price Index (CPI), provided
But the CPI has very rarely dropped since the
and downward adjustments can be made only to a specified
22
floor level.
There have been atypical cases, however, even
outcome has been
limited to small
less favorable to labor.
In
in
the fifties,
when the
manufacturing, those cases have been
wage decreases under escalator clauses, paralleling minute drops
Walton, Richard E., and McKersie, Robert
Negotiations (New York: McCraw Hill, 1965),
20.
,
21.
Op.Cit, Rees, p.
22.
Op. Cit., Rees,
21
p.
li+S
11
B.,
p.
A
Behavioral Theory
359
qf_
Labor
in
Consumer Price
the
UAW
(GM)
Index. For example,
March 1983. Furthermore,
wage
general
and
19^*9
1956 General Motor's
workers' wages were decreased eight times by one cent, once by two
cents and once by three cents.
until
between
increaise at all,
Since March of
April
1956 no such decreases occurred,
1982 saw the first
UAW-GM
contract with no
and reduced wages for new hires, since
the auto, steel and rubber industries
19'f5.
saw no actual wage freezes or cuts
Still,
at all
through 197^.'^^
But
in
the 1950s, '60s, and most of the '70s at least the large unions in
manufacturing had established seniority rules and had gained
Thus, even workers with little seniority
contracts.
who were
SUB
clauses in their
laid off
received an
average of about 'tO-45% of their normal wages, beyond unemployment insurance.
Together, these incomes generally amounted to at least
75%
of the worker's
Moreover, at the time, unemployment insurance could be collected for 52
wages.
weeks
almost every state.
in
(Currently,
it
runs out after 20-26
weeks
in
most
25
states.)
The unions tended to press hardest for immediate economic gains, and to
avoid more cooperative ventures with management.
Hammer
Writing
in
1982, Brett and
state:
Worker participation in management outside collective bargaining
Participation
has not been enthusiastically received by union leaders.
in Quality of Worklife programs, sociotechnical design programs,
labor-management committees, and employee ownership has been
perceived as a means to divide the loyalty of the rank and
23.
"Wage Patterns and Wage Data," 1983, Bureau
of
file,
which
National Affairs, Washington
DC, 20037
2k.
Ibid.,
p.
The Book
KY, p. 688
25.
149
qf_
the States
,
1982-1983, Council of State Governments, Lexington,
12
-
weakens the union, and
to coopt the workers into
management, which
neutralizes labor as a special interest group... The entry of labor into
cooperative programs hais often come as a reaction to local economic
circumstances, 2'^'th threats of plant closures, layoffs and
unemployment.
But
was not always necessary
it
engage
in
—
indeed,
it
was often undesirable
—
for unions to
anything beyond distributive bargaining over economic issues with
management.
For instance, Walton and McKersie point out that
in
the fifties,
UAW
officials often realized that their collective bargaining
not from attitudinal structuring, but from distributive
bargaining.
Good evidence about the distributive nature of bargaining
in the automobile industry can be discerned in the sequence &i union
breakthrough, management response, union breakthrough, etc.
Top
gains had
come
When the economic focus
the rank and
of
the negotiations so adequately serves the interests of
(and union leaders) there
file
is
little
incentive to seek
more
cooperative modes of bargaining.
Notwithstanding regular contract gains for the unions, by the late fifties
management began
to display
growing determination to make fewer concessions, to
bargaing harder, and to get something
in
1959 strike
This was evident in the long and bitter
workers had to stay off the job for over
But another possible
in
outcome
the steel case was mediation.
for
adjustments
26.
Brett, Jeanne M., and
in
return for what they gave the unions.
of a
six
in
months.
the steel industry, where
28
stalemate such as the one that occurred
The introduction
of a
mediator has often allowed
the parties' positions that were previously considered out of the
Hammer, Tove
Helland, "Organizational Behavior and
Industrial Relations," in Kochan, Thomas A., Mitchell, Daniel, and Dyer, Lee, eds.,
Industrial Relations Research i_n the 1970s: Review and Appraisal (University of
Wisconsin, Industrial Relations Research Association, 1982), pp.
239-^*0
,
27.
Op. Cit., Walton and McKersie,
28.
Op. Cit., Rees,
p.
p.
373
199
13 -
This kind of mediation
question.
was performed by Richard Nixon during the steel
negotiations being held at the time of the
provide parties with new information that
1959-60 strike.
may
them
lead
Technical mediators can
to
modify their
Mediators can also allow the parties to analyze the "utility functions" of
positions.
outcomes
likely to result
from particular contracts
in
such a way as to
both
let
sides keep secret the detailed information involved in their negotiation
calculations.
29
Mediation has been useful
major industries.
attaining contract agreements in almost
But there are circumstances under which
Brett and
effective.
in
Hammer
it
is
all
our
not likely to be
conclude the following:
...mediation appears to be more effective when negotiations
break down because one party or the other has become overcommitted
to a position, than, when they break down over economic issues, such
as ability to pay...
As mentioned above, the ability to pay issue arose only occasionally until the late
1970s.
But
when such fundamental problems are
at issue
~
does require lower labor costs in order to stay in business
mediator
is
likely to get
management
to
budge from
its
when the firm
--
really
not even a skilled
position.
Walton and McKersie divide collective bargaining into four subprocesses,
defined as "distinguishable systems of activity" which together comprise the process
These concepts have been applied to collective bargaining
of negotiations.
negotiations
in
the past, particularly during the "stable" period of the late fifties
and early to mid sixties.
They
will
158-9
29.
Ibid.,
30.
Op. Cit., Brett and Hammer,
31.
Op. Cit., Walton and McKersie,
pp.
119,
help us to situate concession bargaining in
269
p.
p.
1
14
its
historical
context, below.
The subprocesses are defined
DISTRIBUTIVE BARGAINING:
as follows:
complex system
"...the
of activities
instrumental to the attainment of one party's goals when they are in
basic conflict with those of the other party. ..(We have in mind) what
game theorists refer to as fixed-sum games..."
INTEGRATIVE BARGAINING:
system of activities which
"...the
is
instrumental to the attainment of objectives which are not in
fundamental conflict with those of the other party and which therefore
Such objectives are said to define
can be integrated to some degree.
an area of common concern, a problem."
ATTITUDINAL STRUCTURING: While distributive and integrative
bargaining "pertain to economic issues and the rights and obligations
of the parties. ..an additional major function of negotiations is
influencing relationships between parties, in particular such attitudes
as. ..the motivational orientation of competitiveness-cooperativeness."
INTRAORGANIZATIONAL BARGAINING:
"...the system of
principals into alignment
with those of the chief negotiator. ..On the union side, the local
activities which brings the expectations
of
membership exerts considerable influence in determining the nature
and strength of aspirations and the international union may dictate the
inclusion of certain goals in the bargaining agenda. ..The union
negotiator is probably mor^ subject to organizational constraint than
his company counterpart."
Distributive bargaining
is
the "wage setting
rationale for conducting labor negotiations."
objective value".
mechanism" connected with "the basic
It
concerns "issues" of "a fixed total
Integrative bargaining concerns "problems" involving "possibilities
for greater or lesser
amounts
of value
which can be made available to the two
The fundamental difference between the two types of bargaining
parties."
summed up
is
by the following proposition:
Money
^the subject of distributive bargaining] can be divided
cannot be reformulated into an arrangement that friav be
an improvement for both sides [as integrative bargaining can be^J.
into units;
it
32.
Ibid.,
pp.
t^-S
33.
Ibid.,
pp.
126-7
3^*.
Ibid.,
p.
129
15
The subprocesses can
entail
some balanced way
purposefully, attending in
Thus, "the negotiator. ..behaves
conflicting goals.
to. ..integrative
potential, desired
relationship patterns, and the need for intraorganizational consensus," as well as the
economics
of
the negotiations.
35
CONCESSION BARGAINING
The consequences
most
the economic crisis are overwhelmingly concentrated
the heavy manufacturing sectors of the
of
steel),
of
which have been the historical strongholds
economy
(e.g.,
autos, rubber and
in
which international competition
The proportion of the workforce that
1950s.
Between the mid
unionized.
In
79%
plant workers
of all
forties and
is
mid
is
few years.
These
most severely threatening.
unionized has been declining since the
fifties,
1978, by contrast, only about
were unionized
These are
of organized labor.
the industries in which union coverage has declined over the last
are the industries
in
in
31-35%
of
American workers were
23% were unionized.
1960-61, but only
71%
In
manufacturing,
in
197't-76.
Unionization has always been concentrated in the Northeast, but these figures have
diminished as well:
in
the '60-'61 period,
were unionized, while the figure
figures
77%
for the South
were 66% and 39%, respectively.
below. Thus,
it
is
of
all
was
plant workers in the Northeast
'^8%.
By the'7^-'76 period, these
These trends are illustrated
in
table
i*,
not just concession bargaining, but a combination of concession
bargaining and declining memberships that threaten American unions today.
But concession bargaining
often one of management's easiest solutions to
353
35.
Ibid.,
36.
Op. Cit., Rees,
p.
is
p.
18
-
16
-
Table A
DECLINE IN UNION MEMBERSHIP
{Number
1960
196A
1970
1974
1978
187
189
185
175
7A
I8,10A
17,919
20,690
21,58A
21,7A2
100
100
100
100
100
108
100
9S
9«
of
Unions
Number of
Members
(thousands)
Percent of
Members
'Number of
Unions
Manufacturing
Unions
Number of
Members
(thousands)
8,839
8,3A2
9,173
9,144
8,119
Percent of
Members
48.8
46.6
44.3
42.4
37.3
165
101
104
101
96
Number of
Members
(thousands)
8,350
8,125
9,198
9,520
9,998
Percent of
Members
46.1
45.3
44.5
44.1
46.0
34
59
60
64
62
915
1,453
2,318
2,920
3,626
5.1
8.1
11.2
13.5
16.7
/"Number of
Unions
Non-manufacturing
Unions
'Number of
Unions
Public
Sector
Unions
Number of
Members
(thousands)
Percent of
Members
Source:
Handbook of Labor Statistics, December 1980, Bureau of Labor Statistics,
Washington DC, 20008
-
17
-
the financial problems
low productivity.
imposed by declining demand, international competition, or
As McKersie and Cappelii note
in
a recent article about
concession bargaining,
^The reason why] ...there are so many concessions
the structural change in the economy.
The industries
undergoing concession bargaining have experienced several years of
severe structural change. Many industries have suffered excess
capacity because of permanent fall in demand (as in tires and autos).
Some have seen the entry of large numbers of low-cost competitors
because of deregulation (trucking and airlines). Others are damaged
by low-cost foreign competition (steel and autos).
These problems
have led to a fall in the demand for the industry's product, and a
subsequent fall in the demand for labor; current levels of employment
cannot be maintained at current cost levels because of the shift in
demand. These problems have been building in many f^ases throughout
the seventies; the recession simply made them worse.
now... [concerns]
But
it
must be kept
management may
in
mind that
not have
much
cases where
in
demand
has fallen permanently,
interest in keeping plants open.
Thus, firms
not even bring up the possibility of concession bargaining to begin with, even
the firm's economic predicament
union's bargaining
The
demand
power
tire industry
is
is
severe.
It
is
in
may
when
these situations that the
negligible.
provides a good example.
In
the mid to late seventies,
The three largest
shifted from bias to radial tires.
Goodrich and Uniroyal) were at the time based principally
in
tire firms
(Goodyear,
the North. Akron was
the tire producing center of the United States. But each of these firms built most
of
their
new
radial plants in the South, usually recruiting non-union labor at lower
wages than their Northern workers.
of their bias
tire
Having already planned to reduce the capacity
production facilities, these firms allowed their
compete among each
other.
In
own
plants to
the end, the plants whose productivity was lowest
McKersie, Robert, and Cappelii, Peter, "Concession Bargaining," paper delivered
at the 30th annual Conference of the Industrial Relations Center, McGill University,
37.
March
1982, pp.
23-^*
18
were closed.
In
the meantime, United Rubberworkers
direct competition with each other.
same
locals
were placed
members
at other plants belonging
firm.
By eliciting labor concessions at the collective bargaining table,
management immediately
for
direct
into
more money
new product
lower labor costs
bargaining
is
in
Massive layoffs were inevitable, and survival
translated into working harder than fellow union
to the
(URW)
it
is
possible
This in turn allows firms to
to cut labor costs-
into further investments, subsidiaries or other enterprises, or
lines,
may
sometimes
in
different regions or countries.
allow a company to cut product prices.
Alternately,
Concession
attractive to management, then, to the degree that these alternative
strategies help restore profitability.
plant closings can be avoided, and
It
appeals to labor insofar as layoffs and/or
management concessions
elicited, in return for
wage/benefit cuts or free2.es.
From
jobs.
of
the union standpoint, the
Employment security
concession negotiations.
39
jseriod.
is
main
issue in concession bargaining concerns
threatened, usually explicitly, by the very initiation
This has been the case during the entire post-war
Often these negotiations begin well
in
advance of contract expiration
in
response to management's claim that jobs or the firm or plant are in immediate
jeopardy.
Thus, the unions always try to ascertain
In
the immediate financial position of the firm or plant
proceed to bargain with management
will
as
in
much
detail as possible
question.
How
they then
depend on the particular negotiators and
Cappelli, Peter, "Concession Bargaining and the National Economy," Conference
Paper, Industrial Relations Association Conference, December 1982
38.
Op. Cit., Rees, p. 59; "Human Resources Information Center," Bureau of
National Affairs, Inc., 1931 25th Street N. W., Washington DC, 20037
39.
'fO.
Op. Cit., McKersie and Cappelli
19
issues involved.
But "hard" bargaining of the kind typically pursued by both
managers and unions (particularly the giant manufacturing unions) may
not
be appropriate under these circumstances.
concessions are to be agreed
If
upon, then final-offer-first strategies are likely to
many non-wage/benefit-related
involves so
Concession bargaining
fail.
issues and potentials that negotiations
are likely to concern particulars, and both sides will probably adjust their positions
Recent negotiations
throughout the course of the bargaining.
in
the steel industry
provide an example of the long process of give and take involved.
concession bargaining outcomes, illustrated
of the intricacy
The type
table
8,
example, give us an idea
for
and length of the negotiations behind them.
of
concessions management usually asks of the unions
several categories.
up to five years.
in
The details of
'^l
Wage
cuts can go as deep as
fall
into
33%. Freezes cover a period of
Other concessions concern things
like
COLA's, severance pay,
pension plans, work hours, labor productivity, unpaid forced vacations, work shifts,
work
rules
and holiday pay.
failing enterprise or
The
plant, its
list
is
a varied one, but
components amount
to the
for
the purposes of a
same
thing: cutting labor
costs.
If
management's economic bind
concessions, unions can ask for
is
serious enough to warrant labor
management concessions
of
two
sorts.
union can ask for future wage/benefit improvements to be granted
the immediate crunch.
firm/plant
is
non-economic
This approach assumes that the
not chronic.
gains.
economic
First, a
sometime
after
fagility of the
Alternately, organized labor can focus on immediate
For example, unions could ask for job rotation plans or
Bureau of National Affairs databank on concession bargaining, processed by
Peter Cappelli, Sloan School of Management, Massachusetts Institute of Technology,
January 1983
k[.
-
20
flexible
A more
work hours.
radical approach might be to
demand increased
worker control over production at the shop floor level, or labor involvement
management decisionmaking
(e.g.,
in
regarding future investment plans or long term
strategy).
Management
invariably promises in return for labor concessions to guarantee
jobs and avoid plant closures
ii
possible
On
.
occasion, the unions can score more
tangible gains, including profitsharing programs, employee stock ownership plans,
extra severance pay, job placement services, board representation, open books,
salary or bonus incentives, advance notice of plant shutdown, the return of labor
concessions with interest, preferential treatment (over non-union labor), advance
notice of layoffs, job sharing and increased management-labor cooperation.
(However, management's attitude toward making concessions to labor
enthusiastic.
that only
A 1982
2% were
Business
Week survey
of
The newspapers alone
tell
us
not
American businesspeople concluded
prepared to make concrete employment guarantees
even substantial labor concessions.
is
in
return for
)
much about
the circumstances surrounding
concession bargaining and about the outcomes of the more publicized negotiations-
Some
of these cases will be considered below.
But in order to gain a rough idea
of the range of industries in which these kinds of negotiations are occurring, and
of
what
is
typically involved,
it
is
necessary to use a broader set of cases.
The
Bureau of National Affairs (BNA), the most prominent industrial relations research
organization
1^2.
in
the US, annually collects extensive data on collective bargaining
Op. Cit., "Corporate Scoreboard,"
p.
66
The BNA has been the nation's primary publisher of information on labor
relations and collective bargaining over the last five decades.
The only other
major contract library in the US is maintained by the Bureau of Labor Statistics
(BLS); the BNA library is almost twice as extensive in its coverage of contracts.
^3.
C.f.,
Op. Cit., "Human Resources"
-
21
-
'+3
cases across
for
all
the period
industries and regions of the US.
between the third quarters
concession bargaining cases
among
of
1981
We have examined these data
and 1982
the BNA's sample.
in
This four quarter period
coincides with the period during which aggregate annual union
from above 9% to below 3%,
We
in
as
noted
in
order to isolate the
wage
increcises
fell
the introduction.
defined concession bargaining to include any case of collective bargaining
which the bargaining unit for the firm claimed that
to increase
wages and/or benefits.
it
was impossible financially
BNA
According to this definition, the
included 210 cases of concession bargaining.
These varied widely
in
data
terms of the
severity of the firm's (plant's) economic plight, the extent and kind of concessions
management was demanding from the
make these concessions, and the
bargain.
in
In
52 of the
in
tables
By far the most
ability of
the union(s) to gain
the union(s) to
something
in
the
210 cases labor was able to elicit some kind of quid pro quo
return for their concessions.
cases are listed
union(s), the willingness of
5
and
The industries and unions involved
6,
these 52
below.
common management
employee stock ownership plans.
in
(See table
i*^.
concessions are profitsharing and
7,
below.)
(There are different kinds
These data were processed at the Sloan School of Management, MIT, by Peter
Cappelli. Cappelli describes them as follows: "BNA asked its reporters. ..to report all
cases where negotiations were 'in distress' -- including those where attempts were
made to reopen contracts or to seek rollbacks. Between the third quarters of 1981
and 1982 210 cases of concession bargaining were reported. ..this sample is
representative of the population of concession negotiations in the economy as a
whole. ..with respect to its distribution across industry groups."
Op. Cit., Capelli. It
is impossible to tell exactly how representative these data are, since the BLS
provides no consistent information on concession negotiations against which we
could check the BNA data.
But aside from the fact that these cases comprise only
a limited sample, they are interesting to us insofar as they include much
information on the 'declining' industries in which union wages have been failing over
the last
two years
or so.
22
in
O
o-
o
a.
o
(-1
U
(0
H <
o
2
O
M
u
u
2
O
u
H
2
u:
<
2
-^^
of profitsharing
The type introduced
programs.
substantially on the structure of the business
to
be separate profit centers,
tied.
some
It
of
is
often the case, as
it
is
in
any given setting will depend
question.
plants are considered
the tire industry, that firms are profitable while
in
is
the profit center, profitsharing
may be
plans could lead to worker gains even though their plant
Gainsharing plans,
If
to plant profitability that workers' gains are
Where the firm
their plants are not.
in
common among
in
the red.
our cases, distribute savings in labor costs
throughout the firm based on the employee's wage/salary as a percent of the total
wage
bill.)
Profitsharing plans had been negotiated in almost one fifth of the cases
in
ownership plans occurred
about
common
kinds of
in
10%
management concessions were vague
But each of these
came up
By contrast, the next most
of these cases.
labor-management cooperation and promises
shutdown.
Employee stock
return for their concessions.
where unions got something
in
discussions of greater
of six months' notice of plant
only two of the 52 cases with union
gains.
Aside from the concentration of profitsharing and stock plans, no other
factor obviously distinguished this
other 75%, in which only labor
25%
made
of the concession bargaining cases
concessions.
A glance
from the
at the industries
involved shows that the profitsharing and stock plan cases could not be
distinguished from the other
75%,
in
which management made no concessions.
Moreover, the types of concessions made by the unions
in
return for the stock
plans and profitsharing programs
were no different than those made
cases of concession bargaining.
Labor concessions almost always included wage
26
in the other
COLA
freezes or cuts, and
deferrals or waivers.
The 210 examples of concession bargaining were overwhelmingly concentrated
in
a handful of industries: autos, steel, airlines and non-electrical machinery.
figure
Given
8.)
this industry concentration,
it
the unions most frequently involved were the
Finally, of the
management,
to that
all
is
of
and the USW.
52 cases where labor was able to get something back from
but three involved negotiations at the level of the firm as opposed
the plant or the industry as a whole.
of
two
not surprising to find that
DAW
(See
bargaining has been
particularly in steel.
common
some
in
of
As noted above, industry level
the heavy manufacturing sectors,
The steelworkers have generally engaged
in
one giant set of
bargaining sessions with the seven or eight major steel companies.
pattern bargaining has been
common:
the
UAW
In
autos,
negotiates with one of the four
major auto producers, and the other three accept the major clauses of the contract
that results.
A BNA
examined
in
report on concession bargaining during
more
detail.
The
BNA
1982 supports the data
found 31 cases of permanent plant closure
the transporation equipment sector, leading to 31,000 layoffs.
concessions to
contract term.)
GM,
for
example,
will
we
in
(The UAW's
save the firm about $3 billion over the
The steel and machinery sectors were hardest
27 cases, plant closure occurred despite labor concessions.
hit,
after autos.
Layoffs peaked
in the
second quarter, "when 376,333 workers were placed on temporary or pemanent
leave..."
Management concessions included new
early retirement provisions,
"Layoffs, Plant Closings and Concession Bargaining," Bureau of National Affairs
Summary Report, Bureau of National Affairs, February 1983, p. 3
'»5.
46.
Ibid.,
p.
4
27
-
In
tJ
c=
5 z
z o
I—
u:
o
<
ED
3
o
n
X
CO
to
ex:
2
O
U
tn
D
C
o
c
o
c
o
c
CI
CJ
c
c
o
c
o
c
03
It
a:
•-3
U
>
c
<
u:
to
CO
o
•
w to
CO o
<
U Z
ti3
z
K C
>
c
>Oi
H
to
r>
C
z
c
>
o
z
Cl.
extended insurance coverage for
The
BNA
measure
members, and extended SUB payments.
laid off
also found that "unions typically
to avoid a plant closing or
make concessions only
^7
as a last ditch
mass layoffs."
These generalizations are on the whole sustained by the highly publicized
cases of concession negotiations.
is
concentrated
in
airline industries.
USW, the URW,
—
The newspapers
us that
tell
though not entirely limited to
—
concession bargaining
the tire, steel, auto, and
—
heavily represented in the airline
industry), and the International Association of Machinists (lAM). (The
and Commercial Workers (UFCW) were also involved
in
a
number
United Food
of the
BNA
Moreover, prof itsharing and employee stock plans have been introduced
cases.)
the
the Airline Pilots (represented by a number of unions), the
International Brotherhood of Teamsters (IBT
all
UAW,
Consequently, the unions most deeply involved are the
four of these industries, as suggested by the
BNA
data.
(See table
in
8.)
The concession bargaining cases most heavily covered by the press also
illustrate the potential
for
are not strictly economic.
unions and
In
managements
to reach accords on issues that
one recent example, the
UAW made
to Ford in return for access to out-sourcing information.
In
wage concessions
a few cases at
Ford, out-sourcing has been limited by higher in-house productivity resulting from
work rule changes.
m.
Ibid., p.
8
HZ.
Ibid.,
11
p.
Weirton Steel's West Virginia plant
will
soon become the
Out-sourcing refers to the purchase of production inputs, rather than their
The shift away from in-house production is generally effected
in-house production.
in order to take advantage of low prices, often resulting from low wages in
non-unionized sub-contractor firms.
'/9.
Katz, Harry, "Assessing the New Auto Labor Agreements,"
Management Review, Summer, 1982
5Q.
-
29
in
The Sloan
largest
employee-owned company
in
the US, though
its
operations wil! be reduced,
and employee wages cut by up to 1/3 when the worker take-over
.Another
example
Airline
agreement
rotation.
of
in
positive integrative bargaining
is
a recent
is
effected.
Peoples' Express
which productivity increases are being sought through job
At Chrysler and Pan
Am,
labor has traded
representation on the firms' Boards of Directors.
52
wage concessions
for
worker
Walton and McKersie point out
that this kind of integrative solution takes into account "all of the uniqueness of
the specific situation."
They continue, "Many companies within the steel industry
have long complained about the poor
uniformly to
51.
of
particular
compromise solutions. ..applied
firms."
Wright, Michael, and Herron, Caroline, "Labor as Management!' in the
Times, March
52.
all
fit
19,
New York
1982
Op. Cit., Cappelli and McKersie, p.
37
Op. Cit., Walton and McKersie, p. 37. It should be noted that intra-union
could intensify as well, as illustrated by recent developments in the airline
The commercial carriers have run into financial difficulties since the
industry.
industry's deregulation and the entry of low-cost competitive carriers.
The oil
Price
price hikes of the '70s and '80s have contributed to their difficulties.
competition has increased vastly.
Newer, smaller, and often non-union competitors
encroach
have begun seriously to
on the market formerly dominated by the older,
big-name airlines. Almost all the established carriers initiated concession
The employees fell into roughly three
bargaining rounds with their unions.
categories, represented by three unions: the airline pilots, the machinists and the
teamsters.
The pilots were forced in most cases simply to make concessions while
getting nothing in return.
The machinists, on the other hand (and to some extent
the teamsters), were often able either to elicit non-financial quid pro quos or to
avoid making concessions at all.
What most likely accounts for the pilots'
comparatively weak bargaining position is the simple fact that they have no
fall-back source of employment, and thus fewer bargaining chips to use in the
negotiations.
Op. Cit., Cappelli
53.
rivalries
30
-
This sort of integrative
however.
In
outcome can cause problems
for
order to maintain the support of the rank and
appear to be driving bargains that are
McKersie emphasize
this
the union leadership,
file,
the union must
the workers' interests.
in
Walton and
point in regard to industrial unions.
UAW, where
the democracy theme is
emphasized and practiced, an elected official has to be careful of the
steps that he takes that are not fully authorized by the membership.
In
But there
is
a union like the
also a
dilemma involved
in
maintaining rank and
file
support, as
suggested by McKersie and Cappelli:
Helping shape business decisions presents an acute problem for
They fina tnemseives in a
union leaders and worker representatives.
dilemma with sharply drawn disadvantages on both sides. On the one
hand, if they become involved, they may be viewed by the rank and
file as having been coopted by management and thereby suffer the
stigma associated with business demise. ..On the other hand, if union
leaders do not get involved to challenge the business decisions they
will also be condemned by the rank and file; an illustration [is as
follows^... The United Autoworkers represented approximately 1,000
workers at a Dana Corporation plant in Wisconsin making front-end
axels.
In a survey conducted among the workers about a year after
the plant closed down, the workers expressed many more negative
feelings about the union than about management.
The steel case also illustrates the conflicts that can arise between rank and
file,
local leaders and national officials,
in
1982 local leaders rejected two
concession contracts negotiated by higher level officials.
So this year, high level
leaders have incorporated the views of dissident local leaders in their bargaining
goals, in order to take into account the concerns
file
and their local leaders.
In
December
of
~
1982, however, national level leaders
had already reduced the number of local leaders who
/, Ibid.,
i?.
p.
and distrust -- of the rank and
may vote on
a basic steel
37'*
Op. Cit., McKersie and Cappelli, pp.
29-30
3. Serrin, William, "Steel Union Faces Many Difficulties," in the New York Times,
February 8, 1983; Serrin, William, "Steel Union Hints at '83 Concessions," in the
New York Times, February 3, 1983
-
31 -
agreement by more than
But even
always the case
officials at
half.
when the mennbership supports concessions
—
there
may
Rank and
at the lower levels, so national
level
contracts that the rank and file
may
is
by no means
may
file
pressure tends to be exerted primarily
union leaders can more easily negotiate
not endorse fully.
the steel negotiations of 1982. Further,
decision not to
which
be a conflict of interest between local leaders and
the international.
concessions, workers' reactions
~
if
This
also illustrated by
is
a plant closes because unions
made
no
be directed at the local by default, though the
make concessions could have been made
at the level of the
international.
Concession bargaining entails several circumstances that did not apply to
collective bargaining during previous decades.
First,
organized labor's business
unionism can no longer be said to work as smoothly and consistently to the rank
and
file's
advantage as
pay-offs of "turn ing
it
once
did.
At least
in
the large industrial unions, the
more toward day-to-day bargaining relationships and the
working out of a modus Vivendi with already organized employers" have diminished
for
the time being.
expense
of
The wisdom of pursuing a policy of business unionism at the
the promotion of "broader programs of social reform"
questioned when union coverage
is
declining and
must be
when even managers admit
to their
efforts to avoid unions.
Moreover, unions have fewer fall-back strategies for when concession
negotiations stall, or
when managements simply refuse
unions consider to be unacceptable.
^.
Op. Cit., Rees,
5.
Loc. Cit., McKersie and Cappelli
p.
The efficacy of
2
- 32 -
to rescind
a strike
is
demands
the
reduced when
demand
many
has fallen, as in so
effectiveness of mediation
relatively low level and
of our
manufacturing industries.
The
dubious when the unions' bargaining power
is
when managements may be better
at a
is
off in the long run by
cutting their losses, shutting down plants, and possibly investing in less tenuous
sectors of the economy.
Republic Steel's acquisition of Marathon Oil
good for steel workers, but
it
is
likely to be very
may
not be
good for Republic Steel.
Faced with fewer alternatives to the unsatisfactory terms of negotiations
with management, the unions are often forced to expand the range of "integrative"
(as
opposed to purely "distributive") issues under discussion.
BNA
cases of bilateral concessions including profitsharing and stock ownership plans
(described in table
links
The descriptions of the
7,
above) illustrate the extent of this type of outcome, which
the fortunes of worker and
linked in previous decades.
gains on distributive issues.
The
company more
UAW
closely than they have usually been
can no longer count on scoring
The Ford example mentioned above
its
primary
illustrates the
widening range of issues (and problems, to use Walton and McKersie's vocabulary)
on the table.
Times are tougher
for
labor in
many
than they have been for several decades.
of our heavy
manufacturing sectors
The frequency of
labor's concessions
and
the workers' decreasing ability to depend on fall-back measures like COLA's, SUB's
and unemployment insurance both contribute to the fact that unionized
manufacturing workers (whether employed or unemployed) face more uncertainty
as do the
heavy manufacturing sectors themselves
time.
6.
Loc. Cit., Katz
- 33 -
--
than they have in a long
—
CONCLUSION
The debate on whether concession bargaining portends anything fundamentally
hew
for
way
the
collective bargaining will be conducted in the future has only
begun to reach the literature.
sparse in
all
the issue.
its
Indeed, the literature on concession bargaining
is
But leading industrial relations theorists do disagree on
aspects.
3ohn Dunlop (Professor of Industrial Relations at Harvard) and Daniel
Mitchell (Professor of Labor Relations at the University of California) both hold
that concession bargaining represents nothing new.
Their argument
is
based on the
prediction/assumption that the form and content of traditional collective bargaining
will
be no different after the recession eases.
Dunlop points out
the
US since the end
in
a recent paper that
of World
War
wages have increased steadily
and that only the rate of increase has
II,
When wage cuts do occur, claims Dunlop, they are either "Temporary"
varied.
"indeterminate". He uses the 1982 concessions at Chrysler and Pan
examples.
The crux of
his
argument
in
is
the supply and
demand terms applicable
social nature.
Institutional
Am
or
as
that labor markets cannot be analyzed in
to other factor markets, because of their
forms of labor markets, for example, are particularly
influenced by the steady characteristics of the employment relationship between
labor and
management.
Thus, peoples' labor constitutes a qualitatively different
analytical category than other production inputs.
His argument
is
a critique of
markets and wage determination.
purely economic attempts to understand labor
He
classifies
his
approach as a
Op. Cit., "Layoffs;" Dunlop, 3ohn, speech before the Conference of Business
Economists, March 1982; Mitchell, Daniel, interview with the Bureau of National
Affairs, January, 1983
7.
Dunlop, John, "The Fundaments of Wages and Labor Markets," unpublished paper.
Harvard University, August 30, 1982
8.
- 34
-
Dunlop believes that "the fundamental elements of labor
"political-economic" one.
markets and compensation
separable presentation."
some
of
the US. ..do not depend upon labor organization or
He continues,
collective bargaining."
Although
in
we accept most
the descriptive aspects of
of
amended
It
It
some
in
most important
of our
true that wages have risen steadily since World War
is
wage cuts have not been
Dunlop's approach.
Dunlop's argument,
view of the significance of concession
in
bargaining over the last two or three years
economic sectors.
as
just Chrysler, but
also other
major auto
manufacturers that demanded wage concessions from their workers
airline to
impose wage cuts on
among
others, have seen
true that in
is
wage cuts
some cases
of
that concessions are only indeterminate,
It
become permanent
~
But
when
it
is
Dunlop points out.
10.
employees; Braniff,
in
1982 labor
hardly comforting to consider
plants
ones.
It
is
sometimes close despite
also difficult to see
when Republic Steel buys Marathon
import Japanese steel.
Ibid.,
Am
as well.
indeterminacy of wage cuts mitigates their importance
9.
Pan
hard to take on faith Dunlop's implication that indeterminate wage
is
cuts will not
symbolic
19S2.
concession bargaining these wage cuts are
explicitly "temporary" or "indeterminate".
them.
in
And wage cuts have not been limited to these sectors; steel and
contracts.
It
its
10% wage cuts
Western, Republic and Continental Airlines also got
rubber,
but
II,
limited and epiphenomenal as one might infer from
was not
was not the only major
a
is
9
conclusions must be
his
"the influence of collective bargaining
p.
In
Oil, or
the aggregate, wages are
—
both material and
when US
still
how the
Steel begins to
increasing in the US, as
But in industries like steel, where major companies begin to
30
Op. Cit., McKersie and Cappelli, p.
23
- 35 -
diversify into entirely unrelated sectors, or to innport lower-cost steel
the idea that
wage cuts
from abroad,
unemployment) may indeed be permanent
(not to nnention
must be taken seriously.
wage determination have
True, the "fundaments" of
But
increase over the post-war peiod.
if
that
is
how can collective
the case,
bargaining be analyzed separately from these fundaments?
the role of collective bargaining
in
his
steady wage
led to a
Dunlop himself includes
category of wage-determining "fundaments".
Where, then, can we situate Dunlop's notion that the institutional forms of labor
markets
(e.g.,
collective bargaining) are "particularly influenced" by the steady
nature of the employment relationship?
We have
with threats to job security.
security
is
crucially important to
concession bargaining
it
does not
this
In
employment relationship
Sectoral
unemployment
sectoral
wage
is
in
American organized labor.
make sense
Thus,
to focus only on
is
in
considering
wages and on the
the highest since the
The threat to the "steady" nature of the
very real
in
the economic sectors
we have focussed
in fact
on.
particular has implications not only for the duration of
cuts, but also for the institutional forms of labor markets.
This
follows from Dunlop's analysis.
Dunlop's main point
supply and
closely connected
a "social" and "political-economic" analysis of labor markets,
fact cannot be overlooked.
statement
is
noted, as Selig Perlman argues, that job
The current unemployment level
nature of the labor force.
Great Depression.
Concession bargaining
demand terms.
is
that labor markets cannot be analyzed in conventional
Our point
is
that the social and political-economic
factors Dunlop uses to explain the uniqueness of labor markets are precisely the
factors that suggest that concession bargaining
that collective bargaining itself
11.
may
is
'not
just
the
same
old thing', and
well be affected by the recent spate of
Op. Cit., Dunlop
- 36 -
concession negotiations.
Audrey Freedman (Senior Research Associate at the Industrial Relations
Conference Board) and Everett Kassalow (Professor of Labor Relations at the
University of Wisconsin) argue that concession bargaining represents a different kind
of labor relations in
become increasingly
plant in question.
12
which negotiations between management and labor have
economic circumstances
tailored to the specific
They conceive of concession bargaining
and that
The
basis of this
managements
argument
many
in
will
it
lead to a
of the troubled
this
is
of collective bargaining.
economic sectors.
leading to concession negotiations: a fall
in
this trend
the shaky economic circumstances facing
is
McKersie and Cappelli have pointed out one
have considered
new kind
the firm or
a manifestation of
They believe
the demise of pattern and industry level bargaining.
likely to continue,
as
of
in
of the
the
Both
main economic circumstances
demand
for
labor.
The data we
essay support both Freedman and Kassalow's as well as
Cappelli and McKersie's theses.
The Walton and McKersie model suggests at least two other potentially new
aspects of industrial relations: different
changes within the unions
(or
firms).
paper that the attitudes prevailing
in
represent a shift to a new cooperative
discern five
new dimensions
1.
in
management and
labor attitudes, and
McKersie and Cappelli argue
many
mode
in
a recent
instances of concession bargaining
of
union-management
relations.
They
concession bargaining:
Union access to management's financial data
(e.g.,
Ford and
the UAW);
2. Union security agreements (e.g., Armour agreement to
recognize the UFCW in all new plants);
Loc,
Cit., "Layoffs;" Freedman, Audrey, and Fulmer, William E., "Last Rites
Pattern Bargaining," in the Harvard Business Review, March-April 1982;
Kassalow, Everett, interview with the Bureau of National Affairs, January, 1983
12.
for
- 37 -
3. Hob-investment linkage (e.g., Genera! Electric and Goodyear
agreements to couple paper workers' employment security with
investment behavior);
Enhanced job security (e.g., Ford and United Airlines'
agreements with UAW and pilots, respectively, to maintain at least a
't.
given percentage of existing jobs);
5. New Values (e.g., an increased emphasis in a number of cases
on "openness, equality of sacrifice and egalitarianism".)
If
is
Freedman and Fulmer's argument
accurate, then
we can
relations: the traditional
in
"Last Rites for Pattern Bargaining"
in
fact expect changes in three areas of industrial
unwillingness of the unions to engage in integrative
bargainmg with management; the attitudes McKersie and Cappelli refer to (see
above); and the internal politics and structure of the unions themselves.
is
it
too early to predict whether collective bargaining will continue to
involve concessions in the industries
be improving
we have focussed
somewhat; how lasting that improvement
But our analysis tends to support
The economy appears
on.
will
be remains to be seen.
Freedman and Fulmer's argument.
the inclusion of profitsharing plans in a
number
increasing emphasis on firm-specific contracts.
First,
of
our cases might indicate an
It
is
true that both profitsharing
and employee stock plans ge^ s£ could set standards that might be adopted
number of firms
of
in
the
same sector
or in related industries.
program must also be fitted to the
course to
It
its
will
(or
firm's
in a
However, both types
particular profit structure, and of
to the plant's) profitability.
be recalled that
in
the cases where unions got
management
concessions bargaining was overwhelmingly concentrated at the level of the firm.
In
13.
1
^.
1982, this held for the steel and auto workers' unions,
Op. Git., McKersie and Cappelli, pp.
Op.
Git.,
Freedman and Fulmer
- 38 -
27-9
to
among
others.
Cappelli
speculates that
it
is
easier for unions to score gains in firm level negotiations
because the union's bargaining power
this
all
its
plants, than
if
only one plant
concession bargaining, from the union standpoint,
specificity of the negotiations
economic circumstances and
level
He argues that
because the firm stands to loose more from the failure to negotiate a
is
contract affecting
of
strongest at that level.
is
~
may
The success
involved.
is
also turn on the
the parties' ability to address the particular
likely future scenario of
a given firm.
may
bargaining fails to work for the unions, this
If
industry
also support the notion that
concession bargaining outcomes are more attractive when negotiations focus on the
specifics of a given site.
As Freedman and Fuimer,
cis
well as
McKersie and
Cappelli, point out, fitting the contract to the firm's circumstances
interest of
*
management.
also in the
16
Pattern bargaining has been the rule
UAW
is
in
the auto industry.
In
1982 neither
wage concessions nor management concessions were uniform across
contracts.
In
steel, industry bargaining has
common
been
since the
the steel workers struck different bargains with different firms.
unclear whether
it
will
1950s.
In
1982
18
(It
is
still
be possible to strike an industy bargain in 1983.)
Given the apparent, at least temporary, decline of high level and pattern
bargaining, what are the implications for the internal politics and structure of the
unions?
First, the
union internationals
may have
to give
bargaining prerogatives to officials at lower levels.
up some of their
This transfer of the
power to
negotiate could also lead to more heterogeneous outcomes, since different
15.
Loc. Cit., Cappelli
16.
Op. Cit., McKersie and Cappelli; Op. Cit., Freedman and Fuimer
17.
Op. Cit., "Layoffs,"
18.
Ibid.,
p.
p.
9
10
- 39 -
negotiators will have different bargaining styles and varying degrees of bargaining
One
power.
result might be to allow the internationals to be
forums other than collective bargaining.
more active
in
For example, higher level officials could
place greater emphasis on organizing the unorganized, or on legislation to limit
non-union subsidiaries, out-sourcing to non-union sub-contractors, or capital
movements
friction
Further, the shift
in
Fulmer have argued, union
the level and nature of negotiations could lead to
officials
in
members.
suddenly forced to reverse their position their legitimacy
might be endangered.
Moreover, the rank and
which
qiight
result
in
phenomenon, and
file
if
will
in
is
they are
the eyes of the rank
in
be unhappy with concessions as well as with
no concessions are made.
too soon to
tell
what
So far, there has been
among middle and upper
But concession bargaining
large manufacturing unions.
it
If
—
if
anything
—
Thus,
is
level
is
a recent
the rank and file will
response.
It
IS
clear that not
all
render a convincing verdict.
the evidence
is
in.
But a few things have
it
hard at this point to
become apparent about how
concession bargaining outcomes differ fom the results of traditional collective
19.
sell
19
no evidence of particularly high turn over levels
union officials
Freedman and
As
manufacturing have spent years trying to
the idea of high level and pattern bargaining to their
job losses
in
how strong the impetus.
declining rank and file support for their union leaderships.
do
more
The long tradition of centralization
the industrial unions will be hard to abandon, no matter
file
also be
between the locals and their internationals, as some traditonally high level
functions devolve to lower level officials.
and
may
to the predominantly non-unionized South. There
Op. Cit., Freedman and Fulmer
- 40
Most obviously, concession contracts confer losses and/or set-backs,
bargaining.
instead of economic gains, on the unionized workforce.
At the sanne time, however
cooperative programs to raise labor productivity are more
circumstances than they have been
in
under these
The effects could be manifold.
the past.
may decrease
Cooperative union-management undertakings
common
tensions that are
exacerbated by hard economic times and by the very need to engage
concession
On the other hand, cooperation with management has never been the
negotiations.
forte of American unions.
demanding
in
The requirements
integrative bargaining
of
may
be very
union leaderships which have traditionally resented anything
for
resembling the cooptation of labor, or
aemotion to the rank
its
of 'interest group'.
Another effect of the integrative nature of concession bargaining outcomes
more closely
to tie labor
issues, this
outcome
will
continues to decline.
It
Beyond posing the
to the fortunes of individual firms.
difficulty of accepting contracts that involve
be unattractive
will
much more than purely
distributive
cases where the firm's profitability
in
be recalled that in 27 out of
203 1982 cases of
concession bargaining, plant closure resulted despite labor give-backs.
Not only do
labor concessions fail to guarantee jobs, but they also imply the possible
some reorganization within the
unions.
may
probable that
it
is
levels.
As mentioned
unclear how the internationals would effect this shift,
will
for
be yet another imp>etus
toward the transfer of bargaining prerogatives to lower union
it
need
The localization of bargaining, along with
the resulting firm-specificity of the negotiations,
above, while
is
it
is
be a difficult process.
Perhaps the most important 'unknown'
concession bargaining.
is
the rank and file reaction to
While the Landrum-Grifin Act spells out
much
of the
structural composition and democratic processes required of the unions, the
individuals
making union
policies and striking bargains with
least indirectly chosen by the workers.
If
- 41 -
management are
at
concession bargaining continues to occur
in so many of our Ijasic industries, it will be interesting to see whether
union members vote in leaderships that propound less business-unlonlstlc
policies, goals and strategies.
As the BNA put it, "1982 could be called the year of concession
20
Concession
It is true that not all the information is in.
bargaining."
bargaining is still a recent phenomenon.
of the information that
ls_
But it is also clear on the basis
in that concession bargaining differs from
collective bargaining as we have known it in the United States between the
mid fifties and the late seventies.
And while concession bargaining has
not been the rule, even in manufacturing, it has certainly not been the
exception.
As such, it will have a strong inpact on the American Labor
ivfovement
Ilie
full implications of concession bargaining will depend on the
dynamics of the national
econc»T\y,
on trends within various industrial
sectors, and on the resulting structural position of organized labor.
Consequently, it is ironically Dunlop's argument that labor markets must
be studied as social and political-economic (as opposed to strictly
economic) phenomena, which most convincingly makes our point:
the kind
of Inpact this concession experience will have on how American Industrial
Relations are conducted in the future depends on what social, political
and economic lessons the unions and managements of the US will learn from
that experience.
It is quite possible that in the sectors most severely
affected by economic crises and the need for concessions, organized labor's
"business unionism" will become
increasingly inappropriate.
to the unions is likely to be tremendous.
20. Op. Cit.,
'Layoffs," p. 8
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2
wC
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